What happens to my KiwiSaver once I turn 65?
So you are approaching retirement and are wondering how to go about retrieving your funds. Until now your KiwiSaver fund has been left largely untouched (first home buyers aside) and now the day approaches when you can finally access it. Similarly, upon hitting the 65 milestone, you’re now eligible for the NZ Superannuation, so congratulations are in order! But before we get there let’s explore what options are available to you.
Despite the common belief that you must withdraw all of your money at 65, this is not the case and there are some significant advantages to remaining invested throughout retirement. Firstly, it becomes very similar to a managed fund wherein a professional makes investment decisions on your behalf to make the best return for you at generally lower fees than are available elsewhere. It is also highly regulated by the NZ government making it an incredibly secure investment option and finally, personalised advice services such as those offered here at National Capital are available to help with any anxieties or questions you have regarding your investments at no added cost to you. Now, a common misconception held by many is that your only option upon retirement is to withdraw the entirety of your KiwiSaver at once. Rest assured this is not the case and you have many options available to you.
Our team here at National Capital talks about this word “planning” a great deal, but to live the stress-free and self-sufficient lifestyle that’s so important to us, planning can’t be undervalued. Depending on your personal circumstances you can choose between a few options when withdrawing, regular withdrawals that act like a weekly, fortnightly or monthly wage, withdrawing a partial sum or withdrawing the entire lump sum amount. Read on to find out which option will suit your circumstances and give you the peace of mind to retire and have #OneLessMoneyWorry.
Withdrawing your KiwiSaver
As I’ve mentioned above there are a few options you can choose from when it comes to withdrawing your money, and the right option for you will depend on your individual circumstances and financial needs. Some questions to ask when 65 comes around include:
- Are you mortgage/debt free?
- Do you have a partner?
- Do you live rural or urban?
The personalized advice National Capital offers takes all of these factors into account and our aim is to help you plan for your future. Take National Capital’s KiwiSaver Healthcheck to help you figure out what your retirement will look like and gain some peace of mind that you’re being advised by the experts.
The first option is to withdraw your entire balance in one lump sum. This option will suit you if you have any remaining mortgage to pay off, plan to invest the money elsewhere or want to live it up on a family holiday to celebrate your retirement. To get the process moving and receive your funds you’ll first need to contact your KiwiSaver provider and complete a withdrawal form along with a statutory declaration. Once you have completed the withdrawal form and dotted all the i’s and crossed all the t’s, you can look forward to receiving the funds in your NZ bank account within a few weeks, the exact time depends on your KiwiSaver provider.
The second option is to make only partial withdrawals, this could be money intended to pay off any outstanding debts, renovate your home or even buy a new car. Unlike when withdrawing the entire lump sum, a partial withdrawal should only take up to a week depending on your provider. As a result of not withdrawing your entire KiwiSaver your remaining funds will stay invested in a low cost, flexible investment option letting your money continue to make returns into retirement.
And lastly, you have the option to withdraw funds on a weekly, fortnightly or monthly basis to meet your costs of living. This will act as an income stream throughout retirement and must be considered carefully to ensure you can live comfortably. Like partial withdrawals, receiving regular withdrawals means your money can remain invested and keep your savings working for you. Regular withdrawals can help supplement your NZ Superannuation which is becoming effective in covering living expenses in the retired community. One final thing to consider with regular withdrawals is some KiwiSaver funds have in place a minimum withdrawal amount, so plan accordingly and contact your provider for more information.
Get your money working for you!
Throughout your entire life, you’ve had to work for your money, but if circumstances permit then it's time to flip the script and get your money working for you. If you choose not to withdraw your KiwiSaver in one lump sum then your money can remain invested and earn you returns later on in your retirement. One method of making your money last throughout retirement and ensuring you don’t outlive your savings is by following a personalised bucketing strategy to ensure you get the maximum returns, while still ensuring it's safely invested. Now although a bucketing strategy doesn’t sound all that fancy, our team here believes this strategy can be incredibly beneficial by dividing your KiwiSaver into three so-called ‘buckets’ to meet your needs throughout retirement.
National Capital’s bucketing strategy will help you be financially fulfilled into your retirement without the stress and uncertainty if you were to invest it yourself. We’ve helped many of our customers implement their own bucketing strategies and cater our services toward your individual circumstances and needs. We’ve helped many clients develop their bucketing system and live out their retirement with fewer financial worries. These buckets are divided depending on the timeframe you will need the money in and you can consider these as your short-term, intermediate and long-term buckets. Something to consider with this investing strategy is that risk and returns for these buckets are higher the longer the time frame is for the bucket.
Funds invested in the short-term bucket should be invested in a low-risk investment option over the course of 4 to 5 years, mainly invested into fixed-income assets to ensure safe and consistent returns. The medium bucket will be used to provide for you looking further into the future, invested for a term of 5 to 9 years depending on your situation. This bucket will be invested in a combination of fixed and growth assets, offering a slightly higher return while still consistent thanks to the diversification between the two asset classes. And finally, there is the long-term bucket, invested in mainly growth assets (shares) this bucket will see the highest returns but represents heightened risk as well which is why it's suitable at the longest time frame. The long-term bucket will be invested for 10 or more years and aims to help ensure your investments outpace inflation and your later retirement years are comfortable and worry-free. In the case that you choose to withdraw your funds lump sum, you should consider that upon closing your account some providers may not allow you to rejoin their KiwiSaver scheme.
Contributing after 65
A common belief is that contributions towards your KiwiSaver stop as soon as you hit 65, while this isn’t the case contributions from the government and your employer do stop unless your employer chooses to do so. This means upon contributing $1042.86 annually, you will no longer receive the government's contribution of $521.43.
As there is no official retirement age in New Zealand those that are still working past 65 will automatically continue with their existing contribution amount and can even make lump sum contributions as well. In the case that you are working after turning 65 and choose not to contribute anymore, you have the option to opt-out, upon request, you can complete a KS51 form and free up that contribution amount for other uses.
What happens if you joined KiwiSaver in your 60’s?
The short answer is you’re eligible to withdraw all your KiwiSaver funds when you become eligible at 65. Regulations in the past stated that if you joined KiwiSaver before 1 July 2019 and were aged between 60-64 you would have been locked in for 5 years. Being locked in meant you could not withdraw your funds when you were 65.
Since then things have changed, and from the 1st of April 2020 you can now either:
- Opt-out anytime after you’re 65 (and withdraw your savings)
- Keep your funds in for the full 5-year term (and withdraw them after that)
You can get the government contribution if you joined:
- Before the 1st of July 2019 and been a member for less than 5 years
- After the 1st of July 2019 and are under 65 years old.
Lifestyle in retirement
Everyone's financial situation and retirement goals will differ. Your location, retirement fund, relationship status and health situation can dictate what your retirement may look like. As the average lifespan for New Zealanders currently sits at 86 years old for men and 88 for women, this is a good indication that you will need to plan ahead for the 20+ years of life you will lead following retirement. Upon retirement your expenses may be higher on average, this can largely be attributed to increased travel expenses as you enjoy your newly found free time. Expenses may also increase the further into retirement you get, as you get older health issues can become more common and costs of healthcare will increase. To help you figure out how you can live the lifestyle you want, National Capital offers a free KiwiSaver Healthcheck to estimate your weekly expenses based on your personal financial situation.
All the best from us!
Our goal here at National Capital is to help 1 million Kiwis become financially secure and not have to worry about money. So if you’re feeling at all uncertain, anxious or even just a little curious, give our KiwiSaver HealthCheck a look. Hopefully, after getting personalised advice and help from our expert customer support team you can be at ease about your future and reach all the goals you set for your retirement.
In all things we like to ask ourselves, are we following National Capital’s core values? And in doing so this helps guide us toward doing what’s right. The principles of pūataata (transparency), tikanga (ethics) and taurikura (prosperity) help us in doing what's right for our community and help to guide them toward a brighter and more financially secure future.